Lending rules could ease

A bill that loosens lending restrictions on state-chartered credit unions passed out of the Senate Workforce Services and Community and Economic Development Committee on Friday.

SB296, sponsored by Sen. Curtis Bramble, R-Provo, is the result of four weeks of negotiations between the Utah League of Credit Unions and the Utah Bankers Association and avoids a ballot-box initiative the league said would overhaul rules for state-chartered credit unions.

SB296 changes the amount of time a new credit union member must wait to qualify for a business loan, from six months to immediately after joining. It also allows the current $250,000 business loan cap to increase each year with the Consumer Price Index.

For personal loans, the bill increases the cap from 1 percent of "capital and surplus" — defined as members' savings and earned income — to 4 percent.

About 55 credit unions in Utah have state charters.

If the bill is passed, it will provide state-chartered credit unions meaningful relief, Utah League of Credit Unions President Scott Simpson, told the committee Friday.

Since 1999, 15 credit unions have abandoned their state charters for federal charters, Simpson said.

The Utah Bankers Association President Howard Headlee said his association is neutral toward the bill. As a result of the negotiations, the association agreed not to oppose the measure.

"I did want to ask you a question," Pat Jones, D-Salt Lake City, asked before the vote. "How would this affect the larger credit unions versus the small credit unions, the federal charters versus the state charters? Could you just elaborate on that?"

Simpson said the bill is "in no way trying to benefit the larger credit unions that are in a federal charter" because they have membership flexibility that state charters prohibit.

The state's largest credit unions, such as America First and Mountain America, have federal charters.

"The reality is, it doesn't create an attractive enough charter for the larger credit unions to draw them back," Simpson said.

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